The role of game theory in the development of business models in supply chains

Abstract

Coopetition (cooperation between competitive organizations) was conceptually established several years ago. However, the number and diversity of business model elements (products, partners, employees, customers, processes) within and outside particular supply chains has grown, establishing a need for rethinking relationships between stakeholders with similar and yet also competing strategies. Second, with the emergence of e-business and digital transformation, companies have felt an urge to innovate business models while not knowing what partners, end-users and competitors are planning for the future. Organizations need to continually develop their business models by considering the transformations of competitors' business models and by including third parties in the development of business models. Third, the coopetition in business model management is driven by concomitant evolution of multiple supply chain business models in which same organizations have different roles. For instance, with the development of Amazon Marketplace, Web Service and Fulfillment by Amazon, the same organization can be a partner, a customer or a competitor. Since these stakeholders have competing expectations in the development of business models, the game-theory approach is appropriate to observe these interferences. We draw on Prisoner's dilemma model to present how the desirable outcome - a goal that delivers most value for all players - is achieved. This can also be facilitated by an introduction of a coordinator, i.e. a third party, which moderates the game.